New Study Finds Strong Demand for Lease-to-Own Options Amid the BNPL Boom

At the intersection of the buy now, pay later (BNPL) revolution and the ongoing quest for those with little or no credit to access better payment terms, lease-to-own, a familiar type of installment payment created for durable goods — from refrigerators to dishwashers to other household machinery — is being re-energized amid the boom in alternative credit.

In the report Finding Retail’s Invisibles: Leveraging Flexible Digital Payments to Reach Underserved Durable Goods Customers, a PYMNTS and Katapult collaboration, researchers surveyed more than 2,120 U.S. adults to learn how lease-to-own is fitting into the credit mix.

See more: 75% of Lease-to-Own Consumers Say It Puts Durable Goods Within Reach

The findings get right to the heart of what’s powering the BNPL movement. “Consumers who choose lease-to-own cited flexibility (79%) as a top reason. Leasing to own allows consumers to make payments on a product over time while using it — along with early purchase options or the choice to return it without further obligation,” per the study.

“Many consumers also said lease-to-own options were the only way they could afford to complete the transaction (75%) and that it allowed them to obtain items they needed right away (73%).”

See also: Finding Retail’s Invisibles: Leveraging Flexible Digital Payments to Reach Underserved Durable Goods Customers

Lease-to-Own and the Loyalty Effect

Like BNPL and its installment payments forebearers, lease-to-own is known to create higher levels of consumer satisfaction with both merchant and brand, which leads to loyalty.

Per the study, “66% of consumers who previously used lease-to-own options at checkout plan to use the option to shop again at some point. This is compounded by another statistic: 43% of former lease-to-own program users see the option as incentivizing them to shop with a particular merchant. Almost 22% of all respondents said their willingness to shop is higher with merchants who offer lease-to-own programs. Millennials and bridge millennials show an even higher level of motivation to shop when a particular merchant offers a lease-to-own option (32%), as do consumers with low credit scores (35%).”

That tracks roughly with the effect BNPL has had with the growing number of merchants offering it as the 2021 winter gifting season comes into view. Like BNPL, lease-to-own has a potent appeal.

“When consumers need to obtain a high-ticket durable good and either lack the credit or find that purchasing it in cash would present a financial challenge, lease-to-own options allow them to lease the item instantly and make payments over time,” the study states. “Typically, lease-to-own programs provide the consumer with an option to purchase the item for as low as 5% above the cash price when the consumer exercises the early purchase option within three months of lease consummation.”

Read more: Finding Retail’s Invisibles: Leveraging Flexible Digital Payments to Reach Underserved Durable Goods Customers

Merchants Have Much to Gain With Lease-to-Own

As much as credit-challenged consumers are liking lease-to-own options, merchants are similarly excited by its potential to create loyal shoppers across the demographic spectrum.

“Millennials and bridge millennials (both at 32%) and consumers with low credit scores (35%) are the most likely to say that such offerings will increase their willingness to shop. Our researchers learned that 25% of all consumers also have increased their willingness to shop with merchants that offer lease-to-own programs over the last 12 months,” per the study.

Moreover, researchers found that 27% of consumers “who have already used a financing option for a durable goods purchase say they would be more willing to shop with merchants that offer lease-to-own options. The attraction of such programs is elevated among millennials: 32% would be more willing to shop at merchants that offer these options.”

Read more: Finding Retail’s Invisibles: Leveraging Flexible Digital Payments to Reach Underserved Durable Goods Customers